Just when you thought the dust had settled after the significant reduction of red tape in the Queensland property sector through the repeal of PAMDA and the introduction of the Property Occupations Act, fresh red tape is about to entangle the industry. This time it has originated from the Australian Taxation Office (ATO).
Fortunately the changes are set to affect only a small segment of the market – properties sold with a purchase price or market value of $2 million or greater.
What is this all about?
For Contracts entered into on or after 1 July 2016, buyers of property worth $2 million or more will be required to withhold 10% of the purchase price and pay those funds to the ATO following settlement, unless the seller provides the buyer a Clearance Certificate. This affects all sellers and not just foreign owners. The Clearance Certificate is issued by the ATO and confirms that the seller is an Australian resident and that the buyer is not required to withhold the payment.
Why has the ATO brought this regime into effect?
The ATO is concerned about foreign owners disposing of assets in Australia and shifting the sale proceeds offshore prior to complying with their Capital Gains Tax obligations.
What happens if a buyer fails to comply?
If a buyer does not receive a Clearance Certificate from the seller and fails to pay 10% of the purchase price to the ATO, they will become personally liable to pay this amount as a penalty.